The Urethane Blog
Everchem Updates
VOLUME XXI
September 14, 2023
Everchem’s exclusive Closers Only Club is reserved for only the highest caliber brass-baller salesmen in the chemical industry. Watch the hype video and be introduced to the top of the league: — read more
July 27, 2023
China Polyurethane Products Output Dropped 5.5% YoY to 12 Million Tonnes in 2022
PUdaily | Updated: July 25, 2023
In 2022, the global economy experienced a sharp slowdown due to multiple challenges such as the Russia-Ukraine conflict, the European energy crisis, the pandemic, inflation, aggressive interest rate hikes by the Federal Reserve, and significant depreciation of non-US currencies. The rapid decline in the manufacturing sector further incubated the weaker prospects for global economy.
As a new type of high-performance synthetic material, polyurethane products have significant importance in promoting China’s low-carbon economy and improving the living standards of its residents. Polyurethane (PU) is widely used in various industries related to clothing, food, housing, and transportation due to its outstanding properties. Within the complex and volatile economic context, China, being both the largest producer and consumer of polyurethane products, experienced notable impacts on both the production and demand sides. China’s PU products output in 2022 totaled roughly 12 million tonnes, representing a year-on-year decrease of 5.5%, according to Pudaily. The compound annual growth rate from 2018 to 2022 was 1.4%.
PU products mainly include foam plastics, elastomers, fiber plastics, fibers, leather shoe resins, coatings, adhesives, sealants and others. Foam plastics make up the largest proportion among them. PU foam plastics can be divided into rigid foam and soft foam systems, which have excellent elasticity, elongation, compression strength, and flexibility, as well as excellent chemical stability. Moreover, PU foam plastics also possess superior processability, adhesive properties, and insulation properties, making them high-performance cushioning materials.
PU soft foam products are mainly used for furniture cushions, mattresses, car seat cushions, composite fabrics, packaging materials, and soundproofing materials and more. In 2022, China’s PU soft foam products output reached 2.49 million tonnes, a year-on-year decrease of 10.9%.
The upholstered furniture industry is the largest downstream sector of PU soft foam, with a share of 48.8% in 2022. The consumption of PU soft foam products in the furniture industry contracted significantly in 2022 due to the downturn in the building materials and real estate sectors.
PU rigid foam products are mainly used in refrigerators, freezers, pipelines, spraying foam, panels, containers, etc. In 2022, China’s PU rigid foam products output amounted to 1.96 million tonnes, a decrease of 8.1% compared to the previous year. The refrigeration industry took up the largest share in the PU rigid foam products, accounting for 56.5% of the total output in 2022. Due to factors such as COVID-19 recurrences, changes in the supply chain, and a decline in economic growth, as well as the high ownership and low replacement frequency (a refrigerator’s service life is around 10 years), the decline of the real estate dividend, soft demand caused by low consumer confidence, and high inflation, wars, and interest rate hikes in many European and American regions, the overseas demand for refrigerators shrank in 2022. Furthermore, due to the high base in 2021, China experienced a significant decline in both domestic sales and export of refrigerators.
July 25, 2023
Dow Inc. (DOW) Q2 2023 Earnings Call Transcript
Jul. 25, 2023 10:46 AM ETDow Inc. (DOW)
Dow Inc. (NYSE:DOW) Q2 2023 Earnings Call Transcript July 25, 2023 8:00 AM ET
Company Participants
Pankaj Gupta – Investor Relations, Vice President
Jim Fitterling – Chairman and Chief Executive Officer
Howard Ungerleider – President and Chief Financial Officer
Jim Fitterling
Thank you, Pankaj. Beginning on Slide 3, we continued to navigate a challenging macroeconomic environment with slow global growth in the second quarter. Despite lower year-over-year sales and earnings, Team Dow delivered sequential earnings improvement by executing on our financial and operational playbook. We leveraged our diverse portfolio to capitalize on gains in packaging and modestly higher seasonal demand in building and construction. This resulted in a sequential improvement in volume. In addition, we continue to implement our $1 billion of proactive and targeted cost savings actions delivering $250 million of savings in the quarter and $350 year to date.
Net sales were $11.4 billion, down 27% versus the year ago period, reflecting lower demand and prices due to slower macroeconomic activity. Sales were down 4% sequentially, as volume gains were more than offset by lower local prices. Volume decreased 8% year-over-year, led by a 14% decline in Europe, the Middle East, Africa, and India, or EMEA. Volume was up 1% sequentially, driven by gains in Asia Pacific and Latin America, as well as in industrial intermediates and infrastructure and performance materials and coatings. Local price decreased 18% year-over-year and 5% sequentially due to lower demand on weak macroeconomic activity, as well as lower global raw material costs.
Operating EBIT for the quarter was $885 million, down from $2.4 billion in the year ago period, primarily driven by lower local prices. Operating EBIT increased $177 million sequentially, driven by gains in packaging and specialty plastics. We generated cash flow from operations of more than $1.3 billion, up more than $800 million versus the prior quarter, driven by improved working capital. On a trailing 12 month basis, our cash flow conversion is 98%.
Our strong financial position gives us the flexibility to continue to advance our long term strategic priorities, supported by our disciplined and balanced capital allocation strategy. In the quarter, we returned $743 million to shareholders through dividends and share repurchases. Year to date, we’ve returned nearly $1.4 billion. And our balance sheet remains healthy, supported by strong investment grade credit ratings.
We also published our 2022 INtersections Report in June. The report once again received limited assurance by our external audit firm and showcases Dow’s continued progress on our ambition to be the most innovative customer centric, inclusive and sustainable material science company in the world.
Now turning to our operating segment performance on Slide 4. In the Packaging and Specialty Plastics segment, operating EBIT was $918 million compared to $1.4 billion in the year ago period. Local price declines were driven by lower global energy and feedstock costs, which in turn impacted polyethylene prices across all regions. Volume declines, primarily in EMEA, were driven by lower demand for olefins and aromatics. Sequentially operating EBIT improved by $276 million, driven by lower energy and feedstock costs.
Moving to the Industrial Intermediates and Infrastructure segment, operating EBIT was a loss of $35 million, compared to earnings of 426 million in the year ago period. Results were driven by lower local prices and demand in both businesses. Volume declines were primarily driven by lower demand for consumer durables, building and construction, and industrial applications. Sequentially, operating EBIT was down $158 million due to lower local prices and increased planned maintenance turnaround activity.
And in the Performance Materials and Coatings segment, operating EBIT was $66 million compared to $561 million in the year ago period. Local price decreases were driven primarily by declines for siloxanes and acrylic monomers. Volume was down on lower global demand for silicones and coatings applications. Sequentially, operating EBIT increased $31 million, driven primarily by seasonally higher volumes.
Next, I’ll turn it over to Howard to review our outlook and actions on Slide 5.
Howard Ungerleider
Thank you, Jim, and good morning, everyone. We continue to expect a challenging macroeconomic environment in the third quarter. While inflation is beginning to moderate, the lagging effects of higher monetary policy on consumer demand and a slower than expected demand recovery in China have resulted in a slowdown of industrial economic activity around the world.
In the US, industrial activity remains weak with June manufacturing PMI in contraction at 46.3. However, consumer demand has remained resilient supported by low unemployment levels. With inflation starting to ease, consumer confidence in June is now at the highest levels since early 2022.
In Europe, recessionary conditions persist and are expected to continue, despite lower energy prices and inflation declining to a 17 month low. Industrial activity in the region continues to contract with PMI reaching the lowest level since May 2020. In China, while we are experiencing growth, the anticipated economic rebound following the end of zero COVID restrictions has yet to fully materialize. June manufacturing PMI continues to hover around neutral level of 50, and China’s exports were impacted by the global demand slowdown, contracting at the fastest pace since the beginning of the pandemic.
Around the rest of the world, India’s manufacturing PMI expanded to 57.8 in June as demand outpaced higher input costs and ASEAN manufacturing PMI remained in expansionary territory. Manufacturing activity in Japan, however, retreated back to contractionary levels following improvements in PMI for three consecutive months. Given these regional dynamics, we will continue to take a disciplined approach to managing our operations and adapt our business to the evolving market realities.
In the Industrial Intermediates and Infrastructure segment, while demand in energy end markets remains resilient, we expect continued demand pressuring consumer durable end markets. We anticipate a $15 million tailwind from our cost savings actions, as well as a $25 million tailwind following the completion of a planned maintenance turnaround from the second quarter. Additionally, following an unplanned event at our Louisiana operations this month, our preliminary estimate reflects a $100 million headwind to earnings. I want to please reinforce that this estimate is only preliminary at this point. As we get a more refined estimate, we will update if needed.
In the Performance Materials and Coatings segment, we expect continued price pressure in siloxanes, while seasonal demand remains below normal for building and construction end markets, together contributing a $50 million headwind. Our cost savings are on track to deliver a $35 million tailwind from the segment. Additionally, the completion of second quarter turnarounds at our Carrollton and our Zhangjiagang siloxanes facilities are anticipated to contribute a $25 million tailwind in the third.
Operationally, our earnings are expected to be flat with the prior quarter as our self-help is expected to fully offset the estimated margin compression. All in, we expect third quarter earnings to be down approximately a $150 million sequentially before the impact of the Plaquemine outage as a result of the $50 million higher turnaround expense and the $100 million in project driven licensing sales, which will not recur.
Turning to Slide 7, our commitment to financial and operational discipline enables Dow to navigate the near term market challenges, while continuing to invest for the future. We are on track to deliver our $1 billion of cost savings in 2023. We achieved 35% of the savings in the first half of the year and continue to expect we will deliver the remaining 65% in the second half. This includes our previously announced global workforce reduction program. 75% of the 2,000 impacted roles exited at the end of the second quarter and more than 90% are expected to exit by the end of the year. Our $300 million reduction in planned maintenance turnaround spending remains on track and we’re continuing to execute improvements in our raw materials, logistics, and utility costs.
We’re also continuing to execute actions to rationalize select higher cost, lower return assets in our polyurethanes, coatings, and industrial solutions businesses, in line with market fundamentals. These actions support the strong financial position that Team Dow has purposely built since then. Our debt and our credit profile gives a significant flexibility and optionality to continue to advance our strategic priorities across the economic cycle. All in, our actions have allowed us to lower our cash commitments by approximately $1 billion since spin, driven by significantly lower cash interest and pension liabilities, reduce share count, and no joint venture cash contributions.
Jeff Zekauskas
Thanks very much. Two part question. Can you comment on sequential MDI price trends in the United States? And, secondly, you bought back $250 million in shares So that’s maybe about 5 million shares, but your shares went up 2 million sequentially, and you have them flat for the third quarter. So what’s the magnitude of share issuance this year?
Jim Fitterling
Yeah. I’ll take a look at MDI and then I’ll have Howard get the share buyback part of that. Look, on MDI, I think things are in relatively good position. We’ve seen MDI continue to be relatively strong in the market where MDI impact, obviously, automotive has continued to be strong. Where we’ve seen demand down is obviously in durable goods like appliances. And so, that has in some systems offering there that has put some pressure on prices. I think we are in the process of starting up MDI distillation down in Freeport, which is an expansion off of the La Porte capacity, but allows us to retire the La Porte asset. And so, I think relatively speaking, MDI is holding up relatively well. And I think from a supply demand balance standpoint, our expectation is that, some of the capacity that’s been announced out there is going to come on later than expected. And I think that’s going to offer a little bit tighter operating rates than what the industry analysts might be predicting.
Mike Sison
Hey, guys. Good morning. Your volumes are down 8% in 2Q. I think it’s the fourth quarter of [indiscernible] it sounds like third quarter will be down as well. Are you seeing any bottoming in any of your end markets? And do you think the volumes in the second half will maybe improve on a year-over-year basis at some point?
Jim Fitterling
Good morning, Mike. Good question. Volumes were down 8%, obviously, Europe was off 14%, so that’s a pretty significant part of that volume being down. Asia Pacific and Latin America volumes were stronger, and so they’ve held up relatively well. North America has been relatively flat about 1% on volume. So I think you can see, obviously, the pressure on Europe showing up in some of those markets.
In terms of the look at the macro economy, my feeling is this, we know we’re in a global economic slowdown. It really started mid last year. We saw GDP decline through the back half of last year. We saw a little spike up in Q1 of this year, but it’s been down in Q2. And the expectation is, it’ll be down in Q3 and Q4. I think it’s setting up for a ramp back in 2024. People ask a lot of times, are we in a recession? I think we’ll determine if we’re in a recession or not when we look in the rearview mirror. But the leading indicators, the destocking that happened in the fourth quarter and into the first quarter appears to be over inventories are in relatively good control. MEG ethylene glycol typically leads into a slowdown. We saw that happen last year and, obviously, it led into this slowdown. And then a lagging indicator into a slowdown is caustic and chlorine, both sides of the electrochemical unit.
Kevin McCarthy
Yes. Good morning. Jim, with regards to your industrial intermediates segment, can you speak to some of the actions that you’re taking there in terms of propylene oxide and your kind of two way resupply arrangements with [Olin] (ph) on-site there. And then more broadly, maybe as a follow-up to Mike’s question, you’re guiding 3Q a little bit lower. Do you think you’re at or near an earnings bottom in 3Q in Industrial Intermediates or how would you frame that in terms of the bigger picture cycle there?
Jim Fitterling
Good morning, Kevin. Good questions. Let me just break it up into polyurethanes and construction chemicals or the industrial solutions and look at them differently. In polyurethanes and construction chemicals, we’ve been overweight propylene oxide and underweight isocyanates for some time. So you see what’s happening with the asset moves have been trying to right size a bit on PO and exit the merchant market PO business. And that’s what has been announced so far. And then also increase the MDI distillation capacity in Freeport, which is what we’re doing and retiring the La Porte asset. I think that balances us out better with the growth in polyurethanes, which is in the downstream systems businesses where we make higher value. And so, I think you’ll continue to see us do that.
In terms of the Olin relationship, we’ve completed the negotiation of a series contracts in the US Gulf Coast that extends now through 2035, which means that the value and the sustainability and that integrated economics for both parties remain in place. And we’re going to continue to supply ethylene, energy and site services to Olin, in the US Gulf Coast and Germany. So STADA is the site primarily affected there. We’re going to Olin is going to continue to supply us chlorine and sell ethylene for the PO businesses in Plaquemann and also chlorine to the MDI assets in Freeport. I feel good about the working relationship with Olin. I think we’ve continued to manage this well, and I think we both understand that the best value for each company is to continue to work together and keep that integrated economics alive.
In terms of industrial intermediates, I would say it has been growing well. Our focus there is to continue to invest in downstream alkoxylates means to support the growth in things like home and personal care, areas like low BOC solvents for the paints and coatings industries, the intermediates for the agricultural sector. And, obviously, all of the higher value derivatives that we make that go in pharma applications and energy, think oil and gas and gas treatment, gas scrubbing, all which have great growth drivers. And to deemphasize our exposure to ethylene glycol, which is commodity. And most people probably won’t remember when we did the deal with ME Global. We still had a couple of assets here that made ethylene glycol. Longer term, it doesn’t make sense for us to make ethylene glycol and small scale assets. So we’ll move to purified EO only assets for industrial intermediates. And then all the higher value downstream and really emphasize the specialty side of that business versus the commodity.
And I do think the additional drag in the quarter of the fact that ag intermediates were very slow in second quarter because of the hot weather, farmers did not spray in the second quarter, so they missed the whole spray of crops. That’s a pretty significant volume on II&I intermediate capacity, and that’s really why you saw the drag on them. I do feel like with housing and construction being at the bottom right now, I do think you can say we’re at the bottom in that space. And I think things will look optimistic as we moved in — more optimistic as we move into 2024.
July 25, 2023
Serta Simmons Bedding Announces Leadership Transition
Industry Veteran Charlie Eitel Appointed Chief Executive Officer
Seasoned Marketing Leader Tim Oakhill Named Chief Marketing Officer
Established Private Equity Investor Mark Genender to be Named Executive Chairman of the Board of Directors and Former Stanley Black & Decker CEO James M. Loree Has Joined Board
July 25, 2023 08:30 AM Eastern Daylight Time
DORAVILLE, Ga.–(BUSINESS WIRE)–Serta Simmons Bedding, Inc. (SSB), a leading global sleep company, today announced that Charlie Eitel, current Board member and former Chairman and CEO of Simmons Bedding, has been appointed Chief Executive Officer (CEO) and Tim Oakhill, former Chief Marketing Officer (CMO) of Simmons Bedding, has been appointed CMO, both effective immediately. Eitel succeeds Shelley Huff and Oakhill succeeds Guy Longworth, who are both departing the company. In addition, SSB announced today that the Board intends to name Mark Genender as Executive Chairman of the Board, and that James M. Loree, the former President and CEO of Stanley Black & Decker, has been appointed to the Board.
“We have a clear vision of how to strengthen our market position. I look forward to working with the rest of the Board and leadership team at SSB to execute our strategy and deliver the innovative sleep products for which retailers and consumers have always trusted us.”Tweet this
“SSB has a strong foundation built on the company’s deep heritage in innovation and portfolio of leading brands,” said Genender. “To regain market leadership, our new Board believes we must build on that legacy by continuing to innovate and invest in our brands, enhancing retail partner relationships and providing industry leading quality and service. Charlie is an experienced industry leader with deep retailer and supplier relationships and an appreciation for the competitive environment, while Tim is a seasoned marketer with extensive experience building brands and driving product development in the bedding industry. The Board is confident that Charlie and Tim, in addition to the existing senior team, are the right leaders to position SSB for the future.”
“We thank Shelley for leading SSB through its restructuring and positioning the company for its next phase of growth. We wish her well in her future endeavors,” Genender added.
“It is a privilege to join Serta Simmons Bedding during this important moment at the company,” said Eitel. “We have a clear vision of how to strengthen our market position. I look forward to working with the rest of the Board and leadership team at SSB to execute our strategy and deliver the innovative sleep products for which retailers and consumers have always trusted us.”
Eitel and Oakhill join the company’s experienced leadership team including:
- John Linker, Chief Financial and Operations Officer;
- Dominick Azevedo, Chief Sales Officer;
- Kristen McGuffey, Chief Legal Officer;
- Esther Ni, Chief Human Resources Officer;
- Heather Decker, Chief Strategy Officer; and
- Brian Dengler, Chief Innovation Officer.
Loree brings extensive experience to the Board driving operational excellence and business transformation and will play an important role helping the company continue to evolve. In addition to Eitel, Genender and Loree, SSB’s Board is comprised of business leaders with relevant experience in manufacturing, consumer durables and retail, including Jim Fogarty (CEO, FULLBEAUTY Brands), Alan Shaw (Former President and CEO, North America, Electrolux) and Brandi Thomas (Group Vice President and Chief Audit Executive, General Electric).
About Charlie Eitel
Charlie Eitel previously served as CEO of Simmons Bedding from 2000 to 2008 during which time Simmons experienced unprecedented growth and established its position as a global sleep solutions pioneer. He also served as Vice Chairman of the Simmons Bedding Board from 2008 to 2010. More recently, Eitel served on the Boards of both Mattress Firm and City Mattress, a leading retail innovator. He also previously served as Chairman and CEO of WS Packaging Group. Eitel received a B.S. from Oklahoma State University.
About Tim Oakhill
Tim Oakhill previously held various marketing roles including Chief Marketing Officer at Simmons Bedding. In these roles, Oakhill drove significant growth of the product and brand platforms that built on the company’s legacy. More recently, he founded one of the industry’s first direct-to-consumer brands, Yogabed. He served as Worldwide Chief Marketing Strategist for IBM and as EVP at Mattress Firm. Oakhill received an M.B.A. from the University of Virginia, and a B.S. and B.A. from the University of South Carolina.
About Mark Genender
Mark Genender is currently a Managing Partner at Bristol Growth Capital, LLC, a growth and early-stage investor in the consumer/retail and media and technology sectors. Genender previously served in senior investment roles at Eldridge Industries and in the same role at the predecessor entity to Eldridge Industries, Guggenheim Partners. Prior to joining Guggenheim, Genender was a Partner and Portfolio Manager at Red Mountain Capital, co-founded Star Avenue Capital, a consumer growth equity vehicle, and served as a Managing Director/Partner at Fenway Partners. While at Fenway Partners, Genender served as a Director on the Simmons Bedding Board. Genender received his A.B. from Princeton University and received his M.B.A. from INSEAD.
About James M. Loree
James M. Loree is the former President and Chief Executive Officer of Stanley Black & Decker, Inc. Prior to serving as Stanley Black & Decker’s CEO, he served as its Chief Operating Officer. Before that, he served as Chief Financial Officer of The Stanley Works prior to its merger with Black & Decker. Earlier in his career, Loree served in various operating and fiscal management positions of increasing responsibility at General Electric Company. Loree holds a bachelor’s degree from Union College, where he serves as a trustee. Loree currently also serves on the Board of The Whirlpool Corporation where he has served since 2017.
About Serta Simmons Bedding
Serta Simmons Bedding (SSB) is one of the leading global sleep companies. With a 150-year heritage in delivering industry-leading sleep solutions and a mission to help people sleep better so they can live healthier lives, the company is headquartered in Doraville, GA, and owns top brands such as Serta®, which has five other independent licensees, Beautyrest®, Tuft & Needle® and Simmons®. For more information about SSB and its brands, visit www.sertasimmons.com.
July 23, 2023
Everchem Acquires Specialty Products International
Everchem, LLC, a successful and expanding North American specialty chemical supplier providing formulated solutions and raw materials for the urethane and epoxy markets, has acquired Specialty Products International (SPI).
SPI has an extensive product catalog in the urethane specialty additives market. The official announcement from Everchem, LLC was made on July 24 at 8AM EDST. The move to acquire Specialty Products International first started in September 2022 as both company principles – David Patten, CEO / CFO Everchem and Ed Galla, President of Specialty Products International – realized that SPI’s unique product line of solution-based catalyst and additive technologies aligned well with Everchem’s commercial strategies.
Ed Galla expressed: “Never did I realize when SPI started up 30 years ago, with our objectives of improving customers’ operations and helping customers capitalize on opportunities, that SPI would be as large and successful as it is today. Based on SPI’s positions in polyurethane additives and specialty chemicals, Everchem is a natural partner to continue and expand on the ‘SPI . . . Dedicated to our Customers’ tradition under the Everchem name. Everchem will be supplying the same products, technologies, and services that SPI’s customers have been accustomed to for decades.”
The Everchem strategy for growth continues to build momentum with our customer centric specialty chemical supplier model. “The acquisition of the SPI business is part of our larger goals bringing highly valued, solutions based chemical technology to the vast polyurethane markets,” as detailed by Del Felter, Vice President Market and Business Development. “The SPI additive technologies product line coupled with their unique applications expands the Everchem customer base and provides additional product placement opportunities for our existing customers.”
The deal was signed June 26 as both companies strive to make a seamless transfer of assets during the next 60 days. Details regarding the deal’s specifics were not provided to the media.
July 20, 2023
STOCKMEIER Urethanes Unveils Exciting Website Relaunch
STOCKMEIER Urethanes is thrilled to announce the highly anticipated relaunch of its website, demonstrating a significant milestone in delivering an enhanced user experience. The revamped website showcases the company’s commitment to being the most trusted polyurethane systems house and aims to provide visitors with a seamless, and intuitive journey through its innovative technologies, products and services. With a fresh design, improved navigation and optimized functionality, the new website offers a broad platform for users to explore.
With a more visually appealing and user-friendly format, the redesigned website allows visitors to easily access information and resources for company information and products. Users can effortlessly navigate through various webpages to explore diverse offerings and gain insights into the latest developments. The upgraded search functionality enables users to quickly find the information they need.
STOCKMEIER Urethanes is excited about the website relaunch and the opportunities it brings to engage with its global user base. As pioneers in the polyurethane industry, they remain dedicated to producing the highest quality products and outstanding commercial and technical service.
As Chairman of the Executive Committee – STOCKMEIER Urethanes Group, Christian Martinkat states, “I am thrilled to introduce our new website, which represents a significant milestone in our digital journey. With its sleek design and improved functionality, our website is a testament to our commitment to providing an exceptional online experience for our audience. Our team has worked tirelessly to bring this vision to life, and I couldn’t be prouder of their dedication!”
To experience the new website, please visit www.stockmeier-urethanes.com.
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